Financial Slack and Firm Performance in Africa: The Mediating Effects of the Banking Sector and Stock Market Development

Demis Hailegebreal Hailu

Financial Slack and Firm Performance in Africa: The Mediating Effects of the Banking Sector and Stock Market Development

Demis Hailegebreal Hailu * § PhD candidate, Lecturer

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Dongbei University of Finance and Economics

Financial Slack and Firm Performance in Africa: The Mediating Effects of the Banking Sector and Stock Market Development

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Abstract

Organizational theory claimed favorable effect of slack on performance and the agency theory; supported an adverse influence of slack on performance. This study explored the association between the financial slack and the financial performance of firms in Africa. This study further rexamined the mediating effect of the banking sector and the stock market development on the slack-performance nexus. While the firm performance is measured as the return on assets (ROA), and return on sales (ROS), the slack components are categorized as available, potential and recoverable slacks. We used firm-level data from 457 firms in 13 African countries from 2006 to 2015. The finding of this study supported the organizational theory that favors a positive effect of slack on performance. The result of mediation analysis shows that both the banking sector and the stock market development have no strong mediating effect on the slackperformance relationship of firms in Africa. This study finally offers micro and macro level policy implications.

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Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

Data Availability

Not applicable for this article.

How to Cite This Article

Demis Hailu. 2019. "Financial Slack and Firm Performance in Africa: The Mediating Effects of the Banking Sector and Stock Market Development". Global Journal of Management and Business Research, Global Journal of Management and Business Research - B: Economic & Commerce GJMBR-B Volume 18 (GJMBR Volume 18 Issue B7).

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GJMBR Volume 18 Issue B7

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Journal Specifications

Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

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Classification

GJMBR-B Classification JEL Code: M20

Submission ReceivedDecember 6, 2017
Peer Review Double Blind
Handling Editor
Accepted December 31, 2017
Published January 15, 2018

Version of record

v1.2

Issue date

January 24, 2019

Language

English

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Total Score: 118

Country: Ethiopia

Subject: Global Journal of Management and Business Research

Authors: Demis Hailegebreal Hailu (PhD/Dr. count: 0)

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